Trade-offs, Uncertainty, Coordination and Market Design in Restructuring for Decarbonisation
Seminar Room 1, Newton Institute
AbstractEconomic activities are coordinated through prices or quantities. Coordination by quantities is conducted through optimization; equilibrium models are used to analyze coordination by prices. The market generally chooses the best instrument but this selection seems to have been particularly difficult so far in the restructuring of the electricity sector. This is the question of the market design that must separate activities driven by prices from those that require more centralization through quantities. While this process remains largely unfinished in the traditional system, it is posed in new terms by decarbonisation. The presentation addresses the question as follows. Starting from residual questions in today market design of the electricity sector so far, it examines the new problems on the basis of three recent documents with the view of uncovering economic coordination problems where methodological advances of mathematical nature (of the computable economic equilibrium type) are required.
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